Few employers say they'll drop health coverage

November 21, 2011

Few employers in Indiana say they’re likely to drop health benefits after state insurance exchanges are formed in 2014, according to a new survey by the health benefits firm Mercer.

Only 8 percent of the 58 Indiana companies surveyed said they are likely or very likely to drop health benefits come 2014, when firms could send their employees to buy coverage in an insurance exchange, where they could qualify for federal subsidies.

The survey, part of a national survey of more than 2,800 employers, did not include enough Indiana firms to be valid for statistical analysis. However, the Indiana results provide a broader glimpse than previously available on the appetite among employers for dropping coverage.

Nationally, 9 percent of large employers said they likely would drop coverage. But among employers with fewer than 500 workers, 19 percent nationally said they were likely to drop coverage. Mercer included no employers in its survey with fewer than 10 workers.

“Employers have had a year to think about the impact of health reform,” Peggy Marks, a principal in Mercer’s Indianapolis office, said in a prepared statement. “When they consider the penalty, the loss of tax savings and potentially grossing up employee income so they can purchase comparable coverage through an exchange, many don’t see a financial advantage in dropping coverage.”

The cost of health benefits has continued to rise faster than inflation, growing 6.1 percent nationally. Hoosier employers got a small reprieve, with a rise in benefit costs of 4.9 percent this year.

The average cost for health benefits in Indiana was $10,685 per worker, according to Mercer’s survey, about 5 percent higher than the national average.

Among employers nationally with 50 or more employees, 61 percent believe their health plans are likely to incur an excise tax for being overly rich, a provision of the 2010 health reform law that will take effect in 2018. Slightly fewer employers in Indiana, 56 percent, think their plans will trigger the tax.

“While cost-shifting to employees is still going on, this year we saw more employers adopting strategies they believe will provide better results over the long term,” Marks said.

Chief among those strategies is ramping up wellness and other initiatives to change employees’ health habits. Among Indiana employers, 80 percent say they will add or strengthen programs or policies to encourage more health-conscious behavior. Nationally, the percentage of employers telling Mercer the same was 87 percent.


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